Employee Referrals or Recruiting Interrupted?

As recently as ten years ago, you were considered to be a forward-thinking, “with it” company if you offered your employees a gift certificate to Wendy’s in exchange for an employee referral. Most organizations felt that referring a potentially good hire to the company was simply part and parcel of how a good and loyal employee behaved: “You’re getting a salary, benefits, a pension program ó and you want to get paid for referring someone to work here! What are you, a socialist?” But times change, and so do perceptions. Today, if your company does not have a good employee referral program, then it places your company’s thinking in line with analog rotary dial phones, vacuum tubes, and good manners. Just too out of date to believe. But, as with all pendulum issues, sometimes we swing too far the other way trying to catch up and “out-hip” all the other “hip” HR/staffing departments. I recently listened in on two colleagues as they engaged in what I call an “Oh yeah? Yeah!” argument (Remember those arguments between two kids on the playground? “Oh yeah? Yeah!”) on the topic of who had the better track record developing employee referral programs. As the argument continued, the percentage of employee referral hires each company accomplished seemed to keep growing every time one rebutted the other. What started at a reasonable and respectable 35% had grown to 75% after three or four rebuttals. I attempted to intercede by asking a question, as much to end the debate as to actually learn anything from these two: “What percentage were original referrals and what percent were actually representative of interrupted recruiting?” The silence indicated that either that they didn’t know the percentage, or they had no idea what I was talking about. To me, the definition of an employee referral is: The submission of a resume or contact information of a person, qualified for current or traditional professional skill needs within the company, who is genuinely interested in being considered for a position within the referring employee’s company. The referring employee is solely responsible for establishing the initial contact and creating an interest in the candidate to consider that employer. The definition of “Interrupted Recruiting” is: A referral based solely on the candidate contacting an employee of the company, after already having received and reviewed recruiting information from one or several sources other than the referring employee, the sole purpose of the call or contact being to seek an accelerated or preferential review process. In one instance your employee earned the referral bonus by initiating a recruiting event, in the other by forwarding a resume already destined to be submitted to you. I am not overly concerned about the semantics or about creating a separate process to offer reduced inducements for employees based on one referral versus another. The fiscal logic of the argument, to even try to require separate programs, would be defeated by the practical consequences and the potential to offend and thereby diminish your employee’s efforts to support the referral program. What’s more, if an employee offers any assistance in hiring a good and substantial future contributor, who wants to parse out formulas for dividing the financial reward based on a sliding scale of objective and subjective involvement in the effort? Not me. But if you compile data on what is working well and what is not, in order to determine the best “bang” for your recruiting “buck,” could failing to consider this factor lead you to wrong conclusions? When you compile inaccurate data, inaccurate conclusions are the only possible outcome. If you assume, based on your “source of hiring” feedback, that 45% of all your hires are the direct result of an employee referral program and the 60% of your budget assigned to print media only accounts for 25% of your total hires, it would be logical to reassign revenue from one to the other with the assumption that such action would thereby increase your referral-based hires. Unless, of course, one-third of your referral hires had first read about your opportunities and were in fact “recruited” by that effort ó unless they merely called your employee to seek a “fast track” into the process. A reduction in advertising would, therefore, ultimately decrease your total recruiting, but could easily be seen as a failure of the referral program due to not tracking your recruiting source data accurately in the first place. Another issue to consider is the quality issue of the employee referral program. You may feel that a higher percentage of employee referrals are interviewed and hired than by other sources. But is that a measure of higher quality or merely the result of a peer-pressure-based, self-fulfilling prophecy? After all, do we not all believe that employee referrals make the best hires? But is that an automatic result based solely on their source? Whenever I go through a stack/screenload of resumes, manually or with an online screening tool, I know the following to be true:

  • 10% of the resumes I reject would have been considered for employment if interviewed face-to-face, as they are better than their respective resumes indicate.
  • 10% of the resumes I accept will be unsuccessful interviews, not even close, as the resumes of those individuals read better than the candidates actually perform on the interview.
  • The perceived quality of a candidate increases in direct proportion to the personal knowledge available about that candidate.

So good candidates and marginal candidates are accepted or rejected, not only on the basis of quality, but also based on criteria not related to their ability to perform the job. Some personal, non-job related considerations that effect quality of candidate considerations in an employee referral program include:

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  • Peer pressure hires. “Why aren’t you hiring my friend?”
  • Managerial pressure hires. “Why aren’t you hiring my neighbor’s son?”
  • The-devil-I-know hires. “The skills are light, but we at least know this person is a ‘team player.'”
  • Shortcut hires. “I can read 500 resumes or just go with the referrals. Nobody in HR/Staffing ever questions managers doing that.”
  • Save-a-good-employee hires. “If we owe John a referral fee, at least I know he won’t resign during the next three months.”
  • Guilt hires. “You know, I had to cut back on raises this year. Maybe I can make up for it with a few employee referrals!”
  • Second income hires. “I’ve made three referrals this quarter already. Wow, who else can I think of who was not really awful?”

Do you require that employee referrals pass through the same pre-screening process as internal applications and external applicants? If a senior manager comes to you with an employee referral indicating this is a closed discussion and an offer will be made, are you compliant merely because it is an employee referral? There is also the risk of creating a “culture club” mindset. Too many employee referrals from the same group of employees, all from the same previous company, can create a group apart from the “mainstream” employees. Your other employees may see the referral program as a method to “sneak” friends into the company if they are not seen as quality hires that passed a muster greater than the fact “one of them” referred him or her. This can be especially detrimental if the manager once worked at XYZ Corp., the employee making the referral used to work at XYZ Corp., the referral is a current XYZ Corp employee, and internal applicants were not interviewed for what would have been a promotion as soon as the “referral” showed up. A well-managed employee referral program can constitute your best source for quality and cost effective hiring. But there are weaknesses that a complacent HR/staffing department could allow not only to destroy the program, but also to weaken the company by permitting the hiring of other than the best qualified candidates. Some checklist items to consider:

  • Ensure you develop the true source of all hires. Pay the referral fee, but make sure you differentiate between true referrals and interrupted recruiting.
  • Maintain the same pre-screening requirements for all submissions, regardless of the source or the sources’ job title or level of importance.
  • Track the candidate flow based on company of origin and any culture impacts it may be having on your various departments.
  • Ensure your employees are trained in contact recruiting so you benefit from people in related fields they meet at professional meetings, training, or daily business contact. Get referrals from other than ex-friends at past companies.
  • Compare the resumes rejected from other sources and referral prior to approving a hire to ensure that quality and not familiarity was the primary factor.

Employee referrals are excellent, when done well. But like everything else in this world, the name alone does not guarantee quality. Only diligence can make that outcome a certainty. The first employee referral program I ever tried to install was blocked by senior executives who felt that employees owed the company, out of a sense of loyalty and team playing, that special service. Now that we understand that the company owes the employee for assisting the recruiting effort, we cannot forget that like all recruiting efforts, regardless of the source, managing the fairness, effectiveness, quality, and long-term impact of this program sits squarely where it always has, on the shoulders of HR/staffing. Have a great day recruiting.

Ken Gaffey (kengaffey@comcast.net) is currently an employee of CPS Personal Services (www.cps.ca.gov) and has been involved in the Department of Homeland Security, Transportation Security Administration project since its inception. Prior to this National Security project Ken was an independent human resources and staffing consultant with an extensive career of diversified human resources and staffing experience in the high-tech, financial services, manufacturing, and pharmaceutical industries. His past clients include Hewlett Packard, First Data Corporation, Fidelity Investments, Fleet Bank, Rational Software, Ericsson, Astra Pharmaceutical, G&D Engineering, and other national and international industry leaders. In addition to contributing articles and book reviews to publications like ERE, Monster.com, AIRS, HR Today, and the International Recruiters Newsletter, Ken is a speaker at national and international conferences, training seminars, and other staffing industry events. Ken is a Boston native and has lived in the greater Boston area most of his life. Ken attended the University of South Carolina and was an officer in the United States Marine Corps.

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